Acorns certainly look ripe for Robinhood picking now that there is no degree of separation after Say Technologies deal, analysts say
Two Say Technologies co-founders are also Acorns brass, and the two business models complement each other enormously, according to close observers.
Brooke’s Note: Ultimately, everything about Wall Street evolves into an RIA. It took decades for Wall Street to take the step. The world is going much faster now. The underlying problem is moral sustainability combined with a need for recurring income. A transactional model is not only a questionable foundation, ethically, but it is also a conveyor belt of a business model. What’s interesting is how the grass is always greener on the other side. Robo-advisers develop greater autonomy, because Robinhood is all the first successes in terms of volume. Young investors with thin wallets found the idea of ”democratizing finance” to be the freedom – however illusory – that free trade gives them. The robot advisers, on the other hand, weren’t only boring but also smacked of patriarchy. Give us your money and we’ll do what Eugene Fama’s efficient and dusty market models tell us to do. Now we need to see if a merger between a RIA and a broker makes sense in the world of digital accelerated apps, as the owners of Robinhood and Acorns get mixed up in the world of mergers and acquisitions.
Robinhood’s purchase of Say Technologies – Acorns’ flagship royalty project – has observers questioning why the two companies don’t combine and have an even bigger party.
Still known as Mirror Images in Adjacent Channels, Acorns and Robinhood are now related in blood because of Noah Kerner and Jeffrey Cruttenden. See: Robinhood tilts its business model towards ‘social media capital’ with the purchase of Say Technologies, which has a Reddit-style chat function and proxy software to run rebellions
Kerner and Cruttenden are CEO and co-founder of Acorns, respectively. Kerner is not a co-founder but has been CEO almost from the very beginning.
Jeff Cruttenden co-founded Acorns with his father, Walter Wemple Cruttenden III, who focused on Acorns, while Jeff’s preoccupation became Say Technologies.
The compatibility is wide, says John Crittenden, strategic advisor to Stealth Mode in Los Angeles and former director of institutional services at Acorn.
“Match made in heaven,” he said. “Design engineering first, aiming to overlap with demos while serving a different but complementary part of the wallet. Acorns equates to a basic robot and expense.
“Robinhood equals satellite and crypto. A combined account base of over 26 million … indefinitely.”
The match also has astrological meaning, according to Will Trout, research analyst at Javelin Strategy.
“It seems that the stars for such a development are aligned,” he says.
“I had often thought that Stash Invest was a more natural partner for HR, given the former’s emphasis on the digital experience and a pricing model designed to give the investor greater fair value than that of Acorns. “
The Acorns-Robinhood blood relationship is remarkable in light of the high volume, low balance approach every business thrives on.
But, then again, retail participation by unlikely mainstream investors could peak, according to Lex Sokolin, senior researcher at Consensys in London.
“The management of SAY has the pedigree of Acorns, which has embraced the theme of microinvestment and understood the power of retail better than mass roboadvisors,” he said via email. “The counter argument would be that we are at an historic level of retail involvement, and maybe this is the top.”
Of course, if Robinhood was going to race at Acorns, he has competition.
Acorns, founded in 2012 and launched in 2014, is fully anchored in a PSPC-style IPO that will provide nearly $ 400 million in capital.
A private investor has committed an additional $ 165 million.
Much of that money can be spent on adding some of Robinhood’s abilities – both organically and through acquisition. See: Acorns Raises $ 565 Million for Robinhood-ize Herself; lately this includes self-directing options and buying fintechs
Still, it’s unlikely that Acorns ever intended to outdo Robinhood Robinhood with trading abilities, Trout says.
“Acorns’ announcement to introduce self-directed investing is, in my opinion, a red herring,” he says.
“This is quite meaningless because Acorns’ value to HR is linked to creating a one stop shop for investment, similar to SoFi or Wealthsimple [outside the US]. Think about savings, investments and other financial services. “
According to Bettermenet co-founder and former CEO Jon Stein, it seems likely that Acorns will pursue its own destiny regardless of the close personal and financial ties of its leaders.
“I see Say as a great investment for Robinhood to engage clients who want to do more than just transact,” he says. “I don’t think this indicates that an Acorns acquisition is more likely. The two companies are separate and distinct.”
Combined with previous increases totaling $ 202 million since its founding in 2012, Acorns will have $ 767 million to fuel its ambitions without the help of Robinhood.
“The public list accelerates Acorns’ ability to create a system of financial well-being for ordinary Americans,” says the SEC filed a press release announcing the IPO of SPAC.
Having a wellness system in its arsenal could prove to be a boon for Robinhood, which is under fire for triggering investor endorphins with gamification to bring them into an investment atmosphere similar to that of ‘a casino. See: Checking Pre-IPO Boxes Robinhood Works Quickly With FINRA With $ 70 Million Settlement, But A Minefield Of Less Friendly Investigators And Litigants Await Us
Indeed, Robinhood sees itself as a creator of wealth, adds Trout.
“Keep in mind that RH has never positioned itself as a ‘stock trading’ platform, but instead avoids that negative connotation by talking about helping investors build wealth,” he says. .
“With a potential acquisition of Acorns or another robot-like platform, managed portfolios are part of the mix.
The micro-investment element resonates in particular, given the ongoing democratization of investment and wealth management activities, and the parallel trend towards personalization, ”he said.